Here are some frequently asked questions to guide an entrepreneur’s inquiry into CTAN. This content will be updated on a semi-regular basis.
What is the best way to get involved with CTAN?
Hands down, the best way to get involved with CTAN is to sign up for one of our 5 Mentor Hours events throughout the year. The event is two hours of round-robin mentoring and feedback sessions with CTAN Members in a “speed dating” format. Mentor Hours is your chance to present your business idea to CTAN Investors and get their feedback & advice on where you are and what you should do next. Mentor Hours is NOT a pitch event; instead it is a great opportunity to discuss the challenges your company is facing, or to figure out if you are a fit for CTAN’s Funding Cycle. We encourage you to come ready with questions prepared. Though you are not required to bring anything to this event, you are welcome to bring a deck or prototype if you have one.
What are some of the benefits of Angel investment?
Angel Investors are high net worth individuals who have been very successful in previous professional endeavors. Angels bring experience, specific industry knowledge, and personal and professional connections to companies in which they hold equity. Remember, they only get their money back or a return on their money if your company succeeds, so they are personally invested in your success.
Do you fund companies outside of Texas?
It is our preference to invest in Austin or Texas based companies, but not a requirement. We are open to companies from out-of-state applying for funding.
What types of companies does CTAN fund? Do you fund lifestyle businesses?
CTAN Members fund unique, scalable, and defensible startup companies. They do not fund lifestyle businesses or 1-off endeavors such as bowling alleys, coffee shops, dance studios, or franchises.
What is a lifestyle business?
A lifestyle business is one in which an entrepreneur operates in a single fashion and which provides varying levels of income over the course of business. There is generally no goal or hope of “exit,” which is where another company would acquire this business for a significant profit for the owners and investors. My list above is considered “lifestyle companies.”
Do you give loans?
We do not give loans as would a bank or other financial institution. The only thing close to a loan in which we participate is called a Convertible Note, which is a debt instrument that converts into equity in the relatively near future during an equity raise. In general, CTAN does not originate Convertible Notes, but may participate if originated with another Angel Network. Either way, our basic evaluation process for the startup is the same.
How long is your Funding Cycle process? When will I receive investment?
In total, approximately 10 weeks. Assuming you progress all the way to the Presentation Meeting, the iterative pitch process is 4 weeks long. If you are invited to follow-on diligence with the Investors, you can expect another 4 weeks of due diligence. Terms, closing documents, and legal review can last another 2+ weeks.
But I can’t wait that long. Do you issue emergency funding or loans?
Absolutely not. We do not issue short term or emergency financing. We recommend you plan ahead.
How can I circumvent the Funding Cycle Process?
You can’t. CTAN Members are investing as individuals, and the evaluation process of the entrepreneurs and the business plan or model takes time. Our Funding Cycle is an organized and intentional process in which to screen and evaluate investment opportunities.
With what terms do you invest?
CTAN Members invest in exchange for equity in your company. Our equity term sheets vary depending on the type of deal, the risk associated with your startup, industry dynamics, and the timeline to exit. We only invest in preferred stock (never common stock). Our liquidation preferences vary from deal to deal, and each section of a term sheet is negotiated depending on the individual circumstance.
What do you mean when you say “preferred stock” and “liquidation preferences?”
You should read the book Venture Deals: Be Smarter than your Lawyer and Venture Capitalist by Brad Feld and Jason Mendelson (Go Blue!). They break all of this down in easy to understand terms, and you should be familiar with the basics before engaging an accredited investor.
What relationships do you have with local incubators or accelerators?
We have relationships with virtually all of the accelerators in town and across Texas, including Austin Technology Incubator, Capital Factory, SKU, Techstars, TechRanch, etc. We also maintain relationships with community support organizations, such as the Chamber of Commerce. Our investors mentor and participate in functions at each one of these organizations. We occasionally refer them to a startup who may need their help, or they refer to us a startup who is ready to raise money.
What is your relationship with other Texas Angel Networks?
We are a member of the Alliance of Texas Angel Networks (ATAN), which consists of 12 Angel Networks across the state of Texas. We speak with them at least monthly, and share deals often. When we share deals, we invest on the same terms.
Does the Executive Director or any member of the CTAN Staff invest or make investment decisions?
No. The CTAN Staff organizes and executes the Funding Cycle process and entrepreneur and investor educational events, and coordinates all logistics of CTAN operations. We conduct diligence on behalf of the Investors, and support the CTAN Membership and entrepreneurial community in any way possible.
Should I send my business plan through the mail to the CTAN Offices?
No. We won’t read it.
Can I have a list of all of your Investors?
No. Investor information and contact information is confidential. It is incumbent on the Investor to share their personal information, should they wish to be public about their angel investing, so we do not distribute names, emails, or phone numbers.